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Lenders to Enron India arm mull asset sale

Lenders to bankrupt US energy trader Enron Corp's $2.9-billion Dabhol power plant in India are considering asking a local court to take it over and sell it, a senior official at a domestic creditor told Reuters.

In early April, the lenders decided against seizing the plant and instead agreed to wait a little longer for an agreement to be reached with international shareholders, including Enron, on an equity sale.

"The equity sale process is stretching too long and testing our patience. We are actively looking at whether to move the court and take over the assets and protect our interests," said the official, who declined to be identified and did not say when the lenders would approach the court for this purpose.

He said the lenders were concerned about the state of the plant, which was rusting, and wanted a quick solution.

Should the lenders seize the asset, Enron and the foreign partners, who had earlier decided to sell their stakes, could lose the ability to influence the price received and how the proceeds are distributed.

Nearly 30 banks and government-run financial agencies lent $1.9 billion to build the plant, which is 65 per cent owned by Enron, 10 per cent each by GE and privately owned US contractor Bechtel Corp and 15 per cent by the Maharashtra State Electricity Board.

Among the foreign lenders are Citibank, ABN AMRO Bank, Bank of America and multilateral agencies including the US government-run Overseas Private Investment Corporation.

The Indian lenders include the Industrial Development Bank of India, State Bank of India and New York Stock Exchange-listed ICICI Bank Ltd.

Houston-based energy trader Enron filed for bankruptcy in December, becoming the largest US corporate failure ever.

To and fro

In January, lenders invited bids for the 85 per cent foreign equity holding in the Dabhol Power Company, which owns and runs the project. But the process ground to a halt after Enron demanded terms unacceptable to creditors.

In April, GE and Bechtel Corp indicated greater flexibility for the terms of an equity sale, and lenders decided to hold off seizing and selling the plant.

They also agreed to appoint two advisers -- one financial, one technical -- to recommend ways in which the project could be restructured.

"Nothing much has been happening on that front either. Things are getting delayed and we want to find a buyer soon," the official said.

The Dabhol power project consists of a 2,184 MW power plant, the largest gas-fired plant anywhere, and adjacent LNG tanker jetty and storage facility. It is bankrupt Enron's largest asset in Asia and most valuable property still on the block.

The 740 MW first phase of the Dabhol power plant started operating in May 1999. The 1,444 MW second phase was nearly complete when construction was halted last June after its sole customer, the nearly bankrupt local utility which is also a shareholder, fell $240 million behind in payments.

Seven companies have expressed an interest in bidding for the project.

Potential multinational bidders include British Gas, Royal Dutch/Shell and French utility Gaz de France.

The Indian companies in the race are Reliance Industries Ltd, BSES Ltd, Tata Power Co and the Gas Authority of India Ltd.

On March 20, a Mauritius-based holding company through which Enron owns its stake, filed for bankruptcy protection in a New York court. By doing so, Enron sought to get a US court to assert a right to oversee the sale process.

The following day, an Indian court granted a request by creditors to appoint a receiver to ensure the plant is properly maintained and barred the plant from becoming part of any US-court supervised bankruptcy proceedings.

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